The President of the High Court has confirmed a €393,512 fine on Waystone Fund Management (IE) Limited (WFM) for failing to respond adequately to red flags and conflicts of interest in the management of an investment fund.
The application for the confirmation was made to Mr Justice David Barniville by Claire Hogan BL, for the Central Bank.
WFM was the manager of an alternative investment fund launched in 2018 with a minimum subscription of €100,000. The investment management functions were delegated to a third party investment manager, but WFM retained regulatory obligations.
In 2019 the investment manager invested €17.7 millon, or 89 per cent of the fund’s assets, in two loan notes, which were difficult to value as there was no active market for such assets, the court was told.
The investment manager later informed WFM that the issuer of the notes was the only source for their valuation, creating a conflict of interest.
It also later emerged that a senior executive of the investment manager with direct involvement in making investment decisions was the owner and director of the issuer of the notes, creating an additional conflict of interest.
The return of the investment was sought in late 2019 after an auditor raised concerns, but only €7.539 million was ever returned.
Asked by the President if the investors were left out of pocket, Ms Hogan said a settlement in 2021 involved a return to the investors of their initial investment as well as a contribution towards their legal costs.
The Central Bank reprimanded Waystone and decided on a fine of €562,160, which it then discounted by 30 per cent as part of the settlement discount provision, Ms Hogan said.
The legislation required the court to confirm the fine once it was satisfied it was not “manifestly disproportionate”, she said.
